Good afternoon and welcome to the Republic Services Second Quarter 2020 Investor Conference Call. Republic Services is traded on the New York Stock Exchange under the symbol RSG. All participants in today’s call will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Nicole Giandinoto, Senior Vice President of Business Transformation and Communications. Nicole?

Hi. I would like to welcome everyone to Republic Services second quarter 2020 conference call. Don Slager, our CEO; Jon Vander Ark, our President; and Brian DelGhiaccio, our CFO are joining me as we discuss our performance. I would like to take a moment to remind everyone that some of the information we discuss on today's call contains forward-looking statements, which involves risk and uncertainties and may materially differ from actual results. Our SEC filings discuss factors that could cause actual results to differ materially from expectations. The material that we discuss today is time-sensitive. If in the future, you listen to a rebroadcast or recording of this conference call, you should be sensitive to the date of the original call, which is August 05, 2020. Please note that this call is the property of Republic Services, Inc. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Republic Services is strictly prohibited. I want to point out that our SEC filings, our earnings press release, which includes GAAP reconciliation table and a discussion of business activities, along with the recording of this call, are all available on Republic's website at republicservices.com. I want to remind you that Republic's management team routinely participates in Investor Conferences. When events are scheduled, the dates, times and presentations are posted on our website. With that, I would like to turn the call over to Don.

Thanks, Nicole. Good afternoon, everyone and thank you for joining us. We're extremely pleased with our second quarter results, which clearly demonstrate the resiliency of our business, the power of our operating model and the strength of our cash flow. We delivered strong results in the second quarter by leveraging the solid foundation we built over the last decade. During the quarter, we increased adjusted earnings per share, delivered double-digit growth in adjusted free cash flow and expanded adjusted EBITDA margin 170 basis points to 29.6%. I'm proud of the results the team delivered and truly inspired by their dedication to the Republic way. Our leaders are working tirelessly to keep our people safe, adjust our operations to changing demand and ensure consistent, reliable service to our customers. Our front-line employees continue to show up for customers and each other, and our support personnel quickly adjusted to a new way of working. It was the collective effort of all 36,000 employees that delivered these results. Our economic outlook is positive. Since April, total volume has increased month-over-month through July. In our small container business, we are seeing a similar volume trend. Additionally, container weights increased sequentially through July indicating steady improvement in consumption and economic activity. As always, we are running our business for the long term and continue to make investments to enhance the customer experience, improve the efficiency of our operations and strengthen our market position. These investments will position us well for future growth. In the second quarter, we continued to effectively allocate capital by investing in value-creating acquisitions and returning excess cash to shareholders. Year-to-date we've invested $124 million in acquisitions to further enhance our market position and grow free cash flow. Our deal pipeline continues to be strong and we remain on track to invest $600 million to $650 million in acquisitions this year. In July, our board approved a 5% increase in the quarterly dividend. The consistent growth in the dividend demonstrates the stability and predictability of our cash flows as well as our confidence in delivering future cash flow growth and year-to-date we've returned $99 million to our shareholders through share repurchases and have approximately $600 million remaining on our share repurchase authorization. We now have greater clarity on how the pandemic impacts our business and how we can continue to adjust operations and effectively manage spending. As a result, we are reinstating our full year adjusted free cash flow guidance. We expect to generate adjusted free cash flow of $1.1 billion to $1.175 billion. Our ability to achieve the low-end of our original free cash flow guidance demonstrates the tenacity of our team, the flexibility of our operating model and the strength and stability of our free cash flow. As an essential service provider, we play a critical role in our communities. This starts by providing uninterrupted service regardless of the circumstances and being a responsible and ethical partner in the community. This quarter we were recognized for our efforts and were named to 3BL Media's 100 Best Corporate Citizens list for the first time. For this list, 1,000 of the largest U.S. public companies were evaluated and ranked based on transparency and performance across 141 environmental, social and governance factors. Lastly, we recently published our 2019 sustainability report, which highlights the progress we are making on our most significant opportunities to positively impact our customers, employees, communities, shareholders and the environment. I would encourage you to give it a look; it's a great read. Now, I’ll turn the call over to Jon.

Thanks, Don. In the second quarter, we remained focused on our priorities: putting our people first, keeping our facilities running smoothly and taking care of our customers. By staying focused on these priorities, we successfully executed our plan and delivered strong financial and operational results. These results clearly demonstrate we're well-positioned to come out of this pandemic stronger and better than before. As expected, revenue decreased in the quarter due to customers temporarily suspending or reducing service levels. Volume decreased 7.4% versus the prior year. The volume decline was steepest in April and sequentially improved throughout the quarter. In April, total volume decreased 10.2%. In June, volume improved to a 5.4% decline versus the prior year. The decline in volume and pace of recovery varies by line of business and by market. Landfill special waste volume was impacted the most, decreasing 17% versus the prior year. Special waste volumes were down 22% in April and in June were down 13%. The decrease in special waste volume was primarily due to jobs being deferred, not canceled, and the pipeline remained strong. In the second quarter, landfill MSW volume decreased 3.5% and landfill C&D volume was essentially flat. Second quarter small container volume decreased by 8.8%. In April, small container volume was down 10.5%. By June, volume sequentially improved 300 basis points and was down 7.5% versus the prior year. Second quarter large container volume decreased 12.4%. In April, large container volume was down 17.3% and by June, volume was down 7.2% versus the prior year. We expect volume to continue to recover over the remainder of the year. During the quarter, we weighed contractual terms to support our customers in their time of need. We made pausing and resuming service simple and easy. We waived late fees and offered flexible payment plans to our most loyal customers in need of assistance. Our results demonstrate that customers appreciate our efforts and value our service. Our net promoter score increased nine points from the prior year and we maintained our customer churn of 7%. Additionally, we successfully executed our pricing program to cover our cost and inflation. This enabled us to continue to deliver the essential services we provide while being mindful of the challenges our customers faced. Total core price was 4.7%. This included open market pricing of 5.5% and restricted pricing of 3.4%. Core price represents price increases to our same-store customers net of rollbacks. Average yield was 2.5%. Average yield measures the change in average price per unit and takes into account the impact of customer churn. Thanks to the team's relentless efforts, we effectively managed our cost and expanded adjusted EBITDA margin by 170 basis points versus the prior year. Due to our investments in innovative routing and workforce planning tools, we were able to quickly adjust our routes for changes in demand. This enabled us to reduce overtime by 25% versus the prior year and increase productivity across our entire collection business. For example, in our large container line of business, productivity improved approximately 230 basis points. Throughout the quarter, our drivers remained engaged and focused. Attendance remained at an all-time high and turnover was at multi-year lows. We decreased safety-related expenses by 19% or 13 basis points of revenue, 30 basis points of revenue compared to the prior year. We achieved the best safety performance in the company's history, reducing safety incidents by approximately 20% versus the prior year. During the quarter, we continued to partner with our municipal customers and discuss the impact of COVID on our business. In the second quarter, residential weights were up 10.1% versus the prior year. Weights tapered down during the quarter and by June, residential weights were up 7.6% versus the prior year. We also continued to renegotiate contracts with favorable pricing terms. We now have $850 million of annual revenue or 34% of our CPI-based book of business tied to a waste index or a fixed rate increase of 3% or greater. Next, turning to environmental services, during the quarter, environmental services revenue decreased 26% from the prior year. This was primarily due to a decrease in drilling activity and a delay in plant project work. The decrease in environmental services revenue resulted in a 90 basis point headwind to total revenue growth. We expect this headwind to continue in the second half of the year. Turning to recycling, during the second quarter, recycled commodity prices increased 29% to $101 per ton compared to $78 per ton in the prior year. The benefit from higher cycle commodity prices was partially offset by an 11% decrease in inbound recycling volume. Finally, preliminary results for July indicate total revenue increased approximately 1.5% from June. We typically see July revenue increase from June due to seasonality. Total revenue in July was down approximately 3% from the prior year. For reference purposes, total revenue in June was down 3.5% from the prior year.

Thanks, Jon. Year-to-date adjusted free cash flow was $743 million, an increase of approximately 20% over the prior year. Free cash flow growth was driven by an improvement in working capital, which was partially offset by a $51 million increase in capital expenditures when compared to the prior year. The increase in capital expenditures demonstrates our commitment to invest throughout the pandemic, which will protect and improve the long-term health of our business. The contribution from working capital includes a one-day improvement in DSL, a two-day improvement in DPO, and a $35 million payroll tax deferral under the CARES Act. We expect a total payroll tax deferral of approximately $100 million in 2020, which will be spread over the next two years. To date, cash collections have remained strong. We believe our DSO performance reflects our customers' willingness to pay due to the high-quality service we provide and the essential nature of our business. We expect the working capital benefit from DSO and DPO to anniversary in the second half of the year since we saw improvement in these metrics in the latter part of 2019. With respect to EBITDA margin, the 170 basis points of expansion over the prior year included 110 basis points of improvement from favorable net fuel and higher recycled commodity prices, and 60 basis points of improvement in the underlying business. The business absorbed $31 million of COVID-related costs during the quarter. These costs related to the investment made in our commitment-to-serve initiative to recognize our front-line employees and support our small business customers, additional PPE and enhanced facility cleaning to help keep our people safe, and supplemental paid time off and enhanced medical benefits for employees and their families. EBITDA margin expansion resulted from reducing operating and SG&A costs by a combined $151 million or 8%. This completely offset the $151 million or 5.8% decline in revenue. Most of the cost reductions resulted from effective cost management that positively impacted nearly all P&L line items. Our focus on cost control will enable us to gain leverage on volume growth as demand returns. Some of the cost improvement resulted from macroeconomic factors that positively impacted results. For example, transfer and disposal costs were down 80 basis points compared to the prior year, primarily due to lower container weights in our small container business. Container weights were at their lowest level in April and progressively got heavier throughout the quarter. While we are not providing specific EBITDA margin guidance, we expect second-half margin to be at or slightly above the second half of last year. This would result in full-year margin expansion. During the quarter, total debt decreased to $8.7 billion and total liquidity increased to $2.3 billion. Interest expense in the second quarter was $92 million and included $16 million of non-cash amortization. Our leverage ratio was approximately three times. Our adjusted effective tax rate in the second quarter was 24.1% and in line with our expectations. Finally, as Don mentioned, we are reinstating full-year adjusted free cash flow guidance of $1.1 billion to $1.175 billion. This guidance assumes continued gradual improvement in economic activity through the remainder of the year. And with that, operator, I'd like to open the call to questions.

Our first question will come from Walter Spracklin with RBC Capital Markets. Please go ahead.

I guess I would like to start with that great color you gave in July on down 3% and then down 3.5% the month before. If you're seeing that trend and taking into consideration seasonality, is there anything to suggest that you wouldn't be in positive growth territory year-over-year by the end of the year?

As we said right, we have a positive outlook on the trend right and we feel good about a couple of things. One, residential weight increases have stabilized and now small container weights are resuming. So again, the strength of American business and consumption rates, we think is getting stronger. People are adjusting to a new way of doing things; you see that all around you. So we have a very positive outlook. Exactly when it will go positive, we can't put our finger on that, and so the guidance we give is around cash flow which we think is strong. We chose in April, we thought we saw a scenario where we could catch up by the end of the range and now we're telling you we're even more confident than that and all the trends are positive. Jon gave you a lot of great trends on cost management and CapEx and people paying their bills, the whole nine yards so to speak. So when it goes positive, we'll have more full-year guidance in the next quarter and hopefully that will be another good news story we can share with everybody.

Absolutely. Trends are certainly in the right direction here, but I guess now looking out a little further, I am not asking for guidance here, but just conceptually, you did a great job of managing costs on the way down so that margin expansion, in fact, occurred. Is there anything to suggest that as volume comes back through the rest of the year, you look out to 2021 and assuming we have, hopefully knock on wood here, a macro situation with a lot more normalcy to it, is it not out of the question that margin enhancement here, as volumes come back could be quite substantial given how well you were able to in fact improve margins on the way down?

Let me give you a couple of thoughts there. So there were certainly some macroeconomic benefits that we realized. In the second quarter, we talked about that. So for example, some of the things we saw around container weight, we would expect those benefits I would say to moderate as we look forward, but I'd say that being said, we do expect to be more profitable as we look for. We've learned things about ourselves on how we can operate differently, one within cost of operations as well as within SG&A, and we would expect those benefits to accrue to the P&L in future periods.

Right. Like Jon mentioned, safety is a bright spot; employee engagement is at an all-time high. We expect that to continue. We're still doing great work to take care of our front-line people. But look, the acquisition pipeline being full; we're talking about tuck-ins, obviously we're tucking into current markets; that's a margin enhancement in and of its own. We talk about running the business for the long term and sort of the depths of COVID; we were busy adapting to a new wave of doing business, but we're back at long-term planning in the business. Jon and his team are still rolling out the RISE platform across the organization, the digital tools. We're well underway there. So we're back at it and all of those things are going to be margin enhancers as we go forward. So there's a lot of good news we'll be talking about here as we get ahead in the next couple of quarters.

Our next question will come from Tyler Brown with Raymond James. Please go ahead.

Hey Jon, so I know there's been a lot of chatter out there about rural versus large urban markets. I think you guys are about a third, a third, a third rural franchise and urban. You gave some great color in aggregate on volume trends but is there any way you could kind of bifurcate urban versus maybe those small markets, if even anecdotally, just basically is there a big difference going on in those different types of markets?

It's very geographic to your point, Tyler. We've analyzed a lot of productivity data and situations to understand that we appreciate traffic. We're more efficient in managing recycling and garbage, and surprisingly, we're observing a consistent trend across both rural and urban markets. One might expect a greater advantage in urban areas, but we're seeing similar benefits across all those markets. This aligns with Brian's earlier point and gives us confidence that some of the cost savings we've seen during this period will be retained due to productivity improvements. While we haven't released specific data, I haven't noticed significant differences in activity levels and volume between urban, suburban, and rural areas.

That's extremely helpful. Hey Brian just a quick clarification on CapEx. So I think coming into this year, you guys were looking for some heightened spend, I think on breakthroughs and such. I think that's stemmed all the way back from the tax bill. First off, is that the case and did you make that spend? And number two, I know 2021 is a long way away, but should we be thinking about that incremental spend peeling off in '21?

Yeah, so Tyler, of the original $100 million that we were spending, it's probably going to be $60 million. So $40 million of that will roll into 2021.

Okay. That's very helpful. And then just my last one here if I can, so Don you reiterated that you plan to spend $650 million. I think you’ve done I think you said $125 million year-to-date or so. Is the preponderance of that $0.5 billion sitting in one property, or are there more kind of multiple sizable deals out there?

Yeah, there is one big deal out there that we've talked about, but there are some others. Again, I continue to say look, there are a number of really nice companies out there, well-run and good markets with good people getting to a place in their life cycle where talking those makes sense. We're engaged in some other good conversations. So we've a lot of confidence in the pipeline, but there is one big deal out there that will carry forward for that.

I think one of the bright spots for this is when we exploded down pricing deals right in the decline here, I understand what demand was going to happen. We never stopped conversation and our acquisition pipeline remains very robust, very active and we now are starting to write deals with sellers as we've got a lot more confident in our outlook and feel really confident going forward for the rest of this year and next year in terms of that one.

Our next question will come from Hamzah Mazari with Jefferies. Please go ahead.

Hey, good afternoon. First of all, congratulations Brian on the CFO role. My first question is you talked about second-half margins being slightly above last year and I realize you even have some costs that come back into the system as container weights get heavier, etcetera, but maybe could you talk about what you see as sort of permanent cost savings during COVID-19, anything sort of structurally that you think you can take out of your business whether it be real estate footprint or maybe there's other stuff that may be more permanent in nature?

Yeah, I'll give you three, Hamzah. Real estate is certainly one of them, and we're reevaluating what roles should always be in the office, what roles can be permanently at home, and what roles will have some flexibility to them, and therefore we capture real estate savings on the ones that are at home or the ones that are flexible. I think travel is another one; the tools that we use to work remotely, we have spent far more connected and efficient than we expected. There will be roles; there is a role for travel going forward. So operating completely virtual is not a norm that we'll have but we'll certainly be spending less on T&E as we go forward, as we kind of think about this in both worlds. And then just in terms of labor productivity, I think our ability to flex labor and move people cross-train, move people across different lines of business has allowed us to serve customers really well as well as manage costs at the same time, and we'll certainly carry some of those forward as we recover from the pandemic.

And then just on pricing, I know a lot of the pricing is already locked in, in Q1, and I'm not asking you to comment on your competitor, but they had much lower average yield and maybe were giving more price relief. Could you just maybe talk about how you were able to keep pricing pretty steady as well as in the face of really down volume? Maybe just talk about your pricing tools and how you see pricing build up for the balance of the year or you expect it to be pretty consistent.

Yeah. So we look at a range of options. Obviously, they're given with an unprecedented event, and definitely want to be empathetic to customers who were their businesses were changing dramatically. So as I talked about, we let people break contracts to suspend service and were in constant communication with them about when they could come back at a time that was right for them. We were flexible on payment terms with some of our customers and certainly offered that to many more that didn't take us up on it and then spent a lot of time and energy on committed reserves. So we put money in the hands of our frontline people to serve our customers. So our philosophy was that customers, while they may need a little cost relief, what they really needed was customers and revenue. When we got our local teams engaged and energized to power our small business customers through a very difficult time, we got a lot of positive feedback from our customers on that front and listen, we are out there every day in a tough environment, picking up the recycling and the garbage and doing a hard job, and our customers are noticing it, and they're paying us a fair price for the hard work that we're doing. So I think that's the primary reason we've been able to sustain it. And going forward, I think we see more of the same; obviously, there's some puts and takes in terms of year-over-year and some fees that might change year-over-year, but the philosophy is not changing. We expect a strong pricing performance in the second half.

Look, they’re paying us a fair price, and they're paying us on time. And I think to Jon's point, I think they value the service and they are rewarding us for the hard work and the effort our frontline people are putting out.

Got you. And I just have a last clarification question. That's very helpful. The $600 million to $650 million in M&A, is that a new normal going forward for you guys? It used to be a lot smaller, but you're seeing your peers do a lot more transactions. And so has the philosophy changed at all? Or this is just sort of a time where you're just seeing much more in the pipeline, and then it goes back to sort of a normalized; I think it was maybe it was $300 million of annual deals you used to do?

Well, I think, even Jon just said, with the pipeline not only being strong for the remainder of the year, the $600 million to $650 million range we've given, we think is strong into next year. So do I have an outlook for the next 10 years? I don't, but I would tell you just based on where we are in this point of history again, there are a lot of great companies out there. We know where they are, who they are, and we have ongoing conversations. We think that a robust pipeline of deals and a continued appetite for good deals and good companies is going to be somewhat of a regular diet for us, at least into the future here. We can see and certainly, we have the appetite; we have the ability; and the team continues to demonstrate their ability to very efficiently integrate these things. And after we get everything up to start a company standard, we really turn into cash flow on that. We think that's going to generate. And as we look back at the deals we've done, we've got a high degree of confidence in what they've delivered. So we know we’re paying the right price for deals and making the right assumptions on the way in. So it gives us all more confidence to keep ongoing.

Great, thank you so much.

Our next question will come from Brian Maguire with Goldman Sachs. Please go ahead.

Hi, good afternoon. And like everybody's congratulations on the nice quarter, solid job managing the cost there.

Thank you, Brian.

Regarding the margin outlook, I'm trying to understand why the second quarter, which saw a 7.5% decline in volumes, is still showing the best year-over-year margin performance. For the rest of the year, volumes appear to be improving on a year-over-year basis, but the margin gains are not keeping pace. Is this mainly due to the decline in recycling fuel contributions, along with possibly higher container weights or other influencing factors?

Yes, I would sit there and say it's what you just mentioned quite honestly. So from where fuel prices are right now, we think sequentially that steps down about 40 basis points. So starting with our 29.6 in the second quarter, there would be a sequential decline of 40 basis points. And then commodity prices would be another 20, right. So you're already down 60 basis points just with those two, and I talked about the container weight, right. And we saw those lighter by 20% in April, and actually by July, that's down to about 6%. So that benefit that we enjoyed in the second quarter, we don't expect that to repeat at the same level going forward. But quite honestly, while it's a near-term cost headwind, it's actually a good sign, right. It's a really good sign for the health of our small business customer.

And Brian, the other thing to keep in mind, if you recall when the CNG tax credit was passed, we recognized two years' worth of benefits in the fourth quarter of 2019. And so that is giving us a headwind, for example, in the fourth quarter of 50 basis points headwinds. So about call it 30 for the second half.

Yes, so that's something we have to overcome.

Got it, so we’re talking about our second half margin, it is cumulative number, so your 3Q could be quite a bit better, but 4Q will have that unique headwind like?

Yes, which is just a timing thing.

Yes, thanks. And then, just a question on capital reallocation with the outlook being a little bit better and being able to get back to providing guidance? Do you think we get back to buying shares back more periodically, like the closure around beforehand? Or is it a little too early to be thinking about reopening that window?

Look, as I said, we've got $600 million remaining on the authorization, we continue to look at the intrinsic value of the business. Again, we look at that based on our three-year outlook and our three-year plan, right. So we're looking at a real actionable plan against what, how we think the stock will perform. You look at our track record; we've always taken a balanced approach with that intrinsic mindset. At the same time, we've said look we will flex buybacks based on opportunity in the market as it relates to M&A and maintain an optimal leverage ratio of call it right around three times, and so all those things are in play. We've got a lot of flexibility. We got a lot of dry powder. We've got a lot of capability. So we're in a good place. And if the market allows it and we see an opportunity, we'll buy opportunistically just as we have. And frankly, I think we've beat the market year-in and year-out. So the balanced approach won't change, but we'll continue to look to put our money to work and return to shareholders the best way that we can; we think we do it as efficiently as anybody.

Okay, and just last one for me, just back on the pricing outlook, it sounds like we saw a little bit of a step down in the year-over-year growth rate, which was expected I think just as the year progresses, the comps get a little bit tougher on a year-over-year basis. Should we just expect a little bit more gradual depletion in that line item?

Yes, it’s gradual. Again, there's some timing things year-over-year. So some of our fees are impacted by fuel declines. There’s a year-over-year decline on that, but our core pricing philosophy is not changing. We want to send a fair price for the hard work that we do, and customers reward and value that and pay us.

Got you. Thanks Jon. All right, congrats again. Have a great quarter.

Thanks Brian.

Our next question will come from Kyle White with Deutsche Bank. Please go ahead.

Hey, good afternoon. Thanks for taking the question. Hey Jon, thank you for the details regarding how borrowings progressed through the quarter and the details on total revenue in July, but curious if you could kind of give a similar level of details on how borrowings were in July by line of business, how small container and roll-off and such?

No, we're not giving that level of detail on July. But steady recovery across that, and I would say that we have a little bit of a geographic headwind that we've had to overcome as the COVID cases initially started out in the Northeast and we're heavily impacted, or we have a lighter footprint; the heavier caseload in the last couple of months has been in the South and Southwest. So Florida, Georgia, Texas, Arizona, California, we have significant market positions in all of those markets. And yet we're still seeing volumes recover. So that gives us a lot of optimism. But the outlook is positive. There's still uncertainty, of course; there are going to be puts and takes across different geographies. And week-to-week, we're running the business for the long term, but we feel like we certainly far more than exceeded the floor, and we're on our way to a nice day recovery.

I think in Jon's prepared remarks, he mentioned seasonality, right. So we actually are seeing some seasonality in the business. And so with all that Jon just mentioned, overcoming what's happening out there again, that leads us to our positive outlook.

Got you, that's helpful and apologies if I missed this and appreciate the free cash flow guidance provided, but did you provide any other kind of moving parts there? What do you expect the CapEx for the full-year, what about working capital?

Yes, we actually in our guidance provided the various components including what we expect from a cash from operations as well as our CapEx. So you can actually see the various components in our 8-K filing. If you kind of take the midpoint of the range though, what we're kind of thinking, it's approximately $1.1 billion of CapEx.

And the only thing I will add about our CapEx plan is naturally, pulls back when we don't have the volume, 10% of our annual CapEx typically is for volume growth. And we're not seeing that growth, we're naturally not going to spend that CapEx, and what we see decline in some of our replacement schedules for trucks naturally pushes out. We're still investing in the business. We're still working on projects, still investing in our digital operations platform which is RISE and running the business for the long term. So the team's done a great job in the face of a pandemic, not just working the quarter but working for our multi-year plan.

Again, it just reiterates the flexibility we have in the business model, when these things happen, we've got the ability to flex very quickly and still produce the cash flow and meet our obligations. So again, I think it’s the great outcome of a lot of great work from the team. But again, it just really shines a light on conversely, the business model is.

And Kyle, as I mentioned, the midpoint is right around $1.1 billion; the range is $1.075 billion to $1.15 billion.

Our next question will come from Sean Eastman with KeyBanc Capital Markets. Please go ahead.

Hey, sorry about that, guys. I'm at my mom's house, so just kind of keeping it quiet. So guys, really impressive job. Congratulations. I just wanted to ask sort of a higher-level question. I mean, post-COVID, it does seem like we could see pockets of population growth in pretty different parts of the country relative to what we've seen over the last many years. So I'm just wondering whether that or anything else sort of in the post-COVID world is changing how you guys are prioritizing or focusing your capital investment dollars or M&A dollars, and any thoughts there would be great.

So look, our strategy around market position hasn't changed, right. We strive to be number one or number two in the markets we serve, we strive to be vertically integrated. And again, the results you see there are result of decades of building around that pillar of our strategy. We want to get in front of the growth, right. We want to be where people are. And so when you think about the Sunbelt that we talked about from Portland, Seattle, Washington, down the coast across Texas, up into the Carolinas, and all the little pockets that people are moving into hotspots like Nashville, right, we're there. We've got a great business mix, a great business portfolio of urban centers which sort of picks up some of the growth around the urbanization trend. We've got a great business position in secondary markets. Right. And so look, you won't see especially winder in the markets we're not in and do startups just because they're hotspots for people; but if we can take a number one or number two position in an adjacent market that we're not in currently but next door or a brand new market, we'll do that. And we've done that; we've done that over the last couple of years; you've seen us go into some new secondary markets because we were able to take a nice position. So again, we've got a great pipeline, we've got a great M&A team, a great leader in that group. And again, we've got the balance sheet to continue to grow that way. The great thing about our business, again as population grows, as business formation grows around that, we're very well situated with our portfolio, and the fact that we're East and West and North and South kind of insulates us when there are sort of micro pockets of bad news, right. So while there may be a couple of cities right now where the epidemic is still on the upswing where there are plenty of cities where the numbers are going the other way, and so we're getting that balanced benefit. So again, that's the strength of the portfolio, the power of the portfolio. And so one thing that will change in our outlook is just as Jon said, I mean, we've learned a lot on how we can work a little differently. And we're taking all those lessons to heart; that will make us better. It'll make us even more attractive of a company to work for. It'll make our employees even more engaged. It'll make us leaner. But it won't change our outlook on how we grow. And again, I think we're very well situated for all of that.

Yes, that makes sense. Good answer. And next, I just wanted to give Brian the floor. I mean, congrats on the CFO role. Just curious, over the next 12 months, where you think you're going to be spending the biggest chunk of your time from an operational perspective? What's the big priority as you come into the big seat here?

Well, look, I mean I think the traditional role of the CFO, when you just think about making sure that we have good quality financials, I mean going to be spending obviously my time on that. But even more so, when you think about me keeping the IT department and when we think about our investments in technology, how they're enabling things like our platform, how they're doing things, quite honestly, even on the SG&A and when we think about modernizing our core systems, that's where I'm going to be spending the majority of my time, just to make sure that we set ourselves up well for future growth and enhance profitability.

Our next question will come from David Manthey with Baird. Please go ahead.

Thank you. Good afternoon, everyone. On the call, you mentioned that you're questioning your own real estate footprint. I'm wondering do you have an opinion on the near-term outlook for commercial construction in general and how that might influence your business into 2021?

Not a strong one given the uncertainty, only that construction has held up pretty well, right? If you think about it. If you had you at C&D tons into our landfill, we printed a pretty strong quarter there. And I think in many markets construction has been the bright spot and everything else was shut down and people were sheltering in place. In most markets, construction had an exemption. And really strong, obviously, on the residential side of construction, probably a lot of current projects getting finished, but we're still seeing new activity in the market, so probably too early to tell in terms of the longer-term outlook.

Yes, one thing I would add to that is I’m hearing a lot of people talk about how they'll use space differently; not necessarily having less space, but having more open space and having more space between cubicles. And I know for us for a long time, we need more office space, so we went from the 10 by 8 cubicle to the 8 by 8 cubicle to the 6 by 6 cubicle and just to sort of squeeze people in. So I've heard that from a number of companies that they're going to use this opportunity to maybe maintain some of the space they have and just make it more wide open, more sunlight for their people, more meeting space that's required, that kind of thing and just to appeal to the next generation of workforce. So I think that's going to be true for a lot of people.

Okay, thank you. And then D&A and tax rate expectations for the full-year 2020. If you didn't give those, and then somewhat related the July revenue, month-to-month increase of 1.5. Do you just tell us what the normal seasonality ranges from June to July?

That's a pretty typical of what we say.

And then as far as the tax rate goes, our assumptions haven't changed from the original guidance that we provided. So we're looking for the full-year’s adjusted effective tax rate of 21%. And then just keep in mind, we also have a tax-related non-cash dollar charge that shows up below operating income. We expect that charge to be about $110 million and weighted to the fourth quarter.

All right, thank you.

Our next question will come from Michael Hoffman with Stifel. Please go ahead.

Thanks. Hi, Don, Jon, Bill welcome back.

Hi, Michael.

Hi, Michael.

I'd like to tease out the free cash flow outlook as they lay the pieces out and I think about your typical ratios like you've been tracking at 40%, 42% conversion ratio, your cash flow from ops are 22%, 23% of revenues, just sort of teasing all those pieces together to try and figure out what was going on. It feels like this should be better than 11 to 175. So what's our headwinds in the second half, you gave a couple of them earlier, to take if only to give about $4 million of incremental free cash to be at the midpoint?

Yeah, Michael, let me give you a couple of numbers here, right. So I talked about in my prepared remarks that we expect the working capital benefit to flip in the second half of the year and quite honestly that's just because we saw really strong DSO and DPO performance in the second half of 2019. So it's not expect that we expect those to step down in the current year. The real big deal is the cash taxes. So when you take a look at what we expect to spend in cash taxes in the second half, it's over $100 million more than what we spent in the first half. The other thing I'll just point out is just because we had some refunds in the prior year, we would expect cash taxes to at least $100 million more on a full-year basis than in 2019; and just to your final point, cash tax as a percent of provision was about 12% last year; this year we're expecting it to be about 70%.

70% or 17%?

70%. Hey Michael, did we mention that we reinstated our original free cash flow guidance?

I know the original guidance is actually $100 million on the upper end, on the higher end. So it feels like maybe that's not actually out of reach.

Well look, nothing is ever out of reach. How's that?

Are the ratios I talked about still consistent kind of 40% to 42% of EBITDA or 22% to 23% of cash flow from ops as a percent to revenues? Is that the way to think about things?

Yeah, that's fair, and again I think the big impact there is just going to be cash taxes with what you're seeing at that 50-plus conversion that we're seeing in the first half versus what a more normalized rate would be.

Got it and just to close on the acquisition type text $450 million, so that leaves to $200 million to do tuck-in that's kind of what you've spent consistently for decades is $200 million tuck-in.

Yeah, I don't know your question unless you're just emphatically agreeing with me but…

I just feel like there is some confusion and I'm like there is not any confusion.

Look, back through all the years you've known us, we have a really good track record of telling what we're going to do and then doing what we say and we wouldn't tell you what we're telling you if we didn’t have a pretty good handle on it, right. So we're very committed to growing through acquisitions, but I can't say enough about the team that we have in place. The person leads that team, the amount of time that we spent talking about it and the amount of great companies that we see out there. So we're in that game and we're going to continue to make intelligent investments in growing our business, expanding our business that way and that's going to be, we'll be right in the hunt along with anyone else, and hopefully because of relationships, because of our style, because of our ability to get things done, we'll get more than our fair share.

Our next question will come from Michael Feniger with Bank of America. Please go ahead.

And Don if you could take a step back for a very long time, there was the goal for public to get back to its prior peak margins in that 30% to 31% range; it's been out there for a while and some investors were frustrated, they didn't know if the maintenance and one fleet these initiatives were actually going to benefit. I think you put up this quarter and I know that like Brian said it's macroeconomic driven, but focusing on retainer weights, but Don maybe you can kind of talk about how you think about those margin targets? We haven’t heard about that in a while. The maintenance expenses seem like it's really under control this quarter, landfill cost; I am just curious how you view this quarter in the context of getting and what you guys talk about the market on a full year basis this year in the context of those prior peak margins?

Sure. I want to emphasize that our goal of achieving a 30% margin is very much a priority for us. We have faced two main challenges. The first is the CPI escalator that has been part of our contracts for decades, which we're making great strides in addressing. Jon mentioned the team's significant progress in transitioning from this outdated contract element to a more relevant approach. This is just one example of how we can shift things and drive progress in the market. We have seen success with the recovery fee and are currently making changes with alternative indices. The second challenge is recycling. We are firmly committed to improving recycling measures, and the team has made impressive progress in updating our pricing models and balancing risks effectively. We’re not only progressing with our customers, who appreciate our work and are willing to pay fairly for it, but we also see these changes becoming more standard in the market, which simply makes sense. As these two areas evolve, particularly around alternative indices and recycling arrangements, they will significantly contribute to reaching our 30% margin target. Our team is dedicated to this goal, and Jon is focused on achieving it. Additionally, the lessons learned during COVID-19 are influencing our future strategies. We believe we can maintain and even enhance our safety and productivity performance, which the teams are committed to. We're making great progress on our system integrations, and this initial implementation is just the beginning. Once we fully digitize and reap the initial benefits, we anticipate ongoing opportunities for improvement. While we can’t anticipate all of this for the remainder of 2020, we’re optimistic as we move forward. We plan to share more insights as conditions stabilise, particularly in February next year. Overall, we believe the outlook is very positive, and the 30% margin target is certainly achievable.

And just lastly, over the years, your volumes were a little lighter than your peers and you guys were shutting business; there were talks about non-regrettable losses. Is your book of business now higher quality than it was a few years ago to help get through a time like that? You guys haven’t talked about those non-regrettable losses in a while, but I'm just curious if you could help us with the context you guys going through that process and where that leaves you now in this tough backdrop. Thanks, Don.

Yeah, we spend a lot of time understanding the customer. Not all customers are equal and they do not all have the same need. So we specifically put a lot of time and energy targeting customers that are willing to pay and willing to stay. Loyalty is a big part of our strategy and where we invest our time and energy and to your point, we had some optimization across the portfolio and a little bit of that will happen all the time as we acquire some more top gains bits and pieces of that business, but we feel very, very good about our portfolio. In terms of customers who are willing to pay at all levels from initial subscription all the way up to national accounts, and everybody has got to pay their fair share. We feel really good about the progress we've made.

Our next question will come from Henry Chien with BMO. Please go ahead.

Have, good afternoon. Thanks for squeezing me in. I just wanted to dig in a little and ask you about the pricing dynamic. It's been very strong and yeah I was a bit curious if you could talk a little bit more about what's driving that and how much of that is structural supply shortage, if you will, will in disposal capacity and how much of it is like what you're saying before and just proving more value to your customers and what that is that's keeping that price at a pretty solid rate?

Absolutely, let's begin with the idea of being an essential service. We truly are essential, and as Jon mentioned, our efforts to understand our customers — their needs, values, and willingness to pay — highlight that reliability is a key concern. Just like you expect water to flow when you turn on the faucet or lights to turn on when you flip the switch, customers expect their services to be conducted promptly and efficiently. The operational improvements we've implemented, especially with our fleet, are paying off. Our focus on workforce planning, employee engagement, and route preparedness is yielding results. Engaged employees contribute to safety and inspire the organization to enhance customer service. Our Net Promoter Score is trending positively, which shows that we offer a service that our customers appreciate. When we demonstrate our commitment to doing our job well, especially under challenging circumstances, customers recognize our efforts, and we can maintain our pricing power. On a broader level, the environment remains rational, considering disposal costs and the challenging landscape of securing space for operations. Despite hurdles, I am optimistic about the resilience of American businesses and the vibrant free market spirit. Our employees exemplify this daily, mirroring what we see in other companies and among our customers, who seem to have a more optimistic outlook than the negative narratives often portrayed in the media. Our financial performance reflects this reality, evidenced by our waste generation rates. The strength of our business model, our pricing mechanisms, and the collaboration of our field leaders underscore the value we provide. Additionally, our digital tools will enhance customer relationships, improve product quality, and strengthen our pricing strategy moving forward.

Our next question will come from Noah Kaye with Oppenheimer. Please go ahead.

Don, you mentioned a couple of times the digital investment in RISE, you started to roll that out last year and at least just the initial feedback is really about improving efficacy and real-time routing information and data visualization. You mentioned that you had implemented a fair amount of that in pandemic. Then the pandemic hit, and first I would imagine that it introduced new variables into the mix to your operations and test that pipeline. So how does it perform? What impact did it make or benefit that you see? How does that experience transform your current digitalization plans going forward?

Yeah, it performed well just from a plumbing standpoint, right. The IT team did an incredible job that everything right. We moved people around and included the right platform right operating without a hitch. So the technical side of it operated very well, and the performance side operated well to capacity. One of those that had it implemented already used it to really reconfigure the operations, right? As weight got heavy on residential and there was more demand there, and then things got contained or constricted in small container, large container, we were able to optimize routes in a great way, and then the deployment itself, back to your cost of what goes away. Our deployment was a typically hand-to-hand combat model where we would go out and spend a couple of weeks working shoulder to shoulder. COVID didn’t allow us to do that, so we've deployed those things entirely remotely. We did stop the pace. We kept going, and the performance in a remote deployment has been on par with the in-person deployment. So as we think about continuing to put tablets in the cab and all the further ways of digital operations, our ability to do that both from a cost and a steep standpoint improves, and that's a great learning coming out.

Look when you think about that from a change management perspective, we've gone from sort of push to pull, right? The things that we're producing here are value-added in the minds of our frontline leaders, and they're anxious to get those tools in their hands. So they're very willing and able to implement that, but they're pulling that capability. And so I am hopeful that our speed to change, the more and more we do these things, our speed of change can actually increase as well.

At this time, there appear to be no further questions. Mr. Slager, I'll turn the call back over to you for closing remarks.

Thank you, Grant. In closing, we are very pleased with our second quarter performance and we're well-positioned as volume continues to recover. Despite volume declines, we grew earnings, delivered double-digit free cash flow, expanded adjusted EBITDA margins. We also reinstated full year adjusted free cash flow guidance, which includes the low-end of our original 2020 guidance range. And then we mentioned that we raised our dividend for 16 years straight. That's a lovely stat. Once again, I'd like to thank all Republic employees for their ongoing hard work, commitment and dedication to our customers and communities. Each of our employees truly embodies the committed to serve spirit. Have a good evening and stay safe.